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Is Hulu About to Turn the Screws on Consumers?

Written by: Rocco Pendola05/01/12 - 7:41 AM EDT

Tickers in this article:
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NEW YORK ( TheStreet) -- I must preface this article by saying, the following rumor comes from the NY Post .

That said, the newspaper has been right before. Even if they're not, the report the newspaper published over the weekend holds considerable meaning for investors in and observers of the media space.

The Postclaims that Hulu plans to shift to a model where subscribers to the online streaming service must prove that they also subscribe to pay-cable or satellite television. According to the report, this is one factor that led to Providence Equity Partners' decision to sell its stake in Hulu to majority owners News Corp. (NWSA) , Disney(DIS) and Comcast(CMCSA) .

If this happens, it only cements my contention that content owners call the shots, leaving middlemen such as Netflix(NFLX) flapping in the breeze. Just the threat of it happening is enough to let Netflix and even Apple(AAPL) , who reportedly has streaming content ambitions, know who is boss.

The knee-jerk reaction to this news: Consumers will just ditch Hulu and go to other streaming services for their content. While they might reject Hulu, they're not going to be able to find content quite as a fresh on any other free or inexpensive service or one that does not require some sort of cable or satellite subscription.

Fair or not, the old guard that controls Hulu (and the old guard in general) has companies like Netflix as well as consumers right where they want them. Why? Because they own and control the content. They can effectively make you pay twice to access that content via two mediums that have, for all intents and purposes, become one and the same -- TV and Internet.

And, as Stacey Higginbotham notes over at Gigaom, Washington does not appear ready to challenge this type of move if Hulu makes it:

Instead of understanding what that convergence meant for the economics of old and new industries and what regulations might be needed to avoid protectionist behavior by pay TV providers and broadcasters, a recent Senate hearing dealt more with discussions around reworking the Telecommunications Act of 1996 for the current era.

Couple this with recent TV Everywhere deals between companies like Disney and Comcast and reports of more to come (the Post says Fox is in talks with Comcast on a similar deal) and the future looks bleak for Netflix as well as consumers who would like to cut the cord and still watch quality programming. Bottom line, the old guard is just not going to give you premium programming for the cost of a standalone streaming subscription.

As things evolve you can stream all of the old and stale scraps you want at places like Netflix, but if you want anything resembling fresh content, you'll need to pay more via on-demand offerings through outlets such as cable, satellite or iTunes.